New bipartisan bill says DeFi project ‘controllers’ must follow KYC rules

If a protocol has no identifiable controller, anyone who invests more than $25 million in developing the protocol would be held responsible

article-image

Utah Senator Mitt Romney | Christopher Halloran/Shutterstock modified by Blockworks

share

A group of US senators has debuted a bipartisan bill focused on money laundering and sanctions compliance that, if approved, would have major implications for decentralized finance protocols.

Senator Jack Reeds, D-R.I., is the sponsor of the bill, the Crypto Asset National Security Enhancement Act of 2023. Sens. Mark Warner, D-Va., Mike Rounds, R-S.D., and Mitt Romney, R-Utah, are co-sponsors. 

The bill was read on the Senate floor Tuesday evening, but as of Wednesday at time of publication, the bill text had not yet been publicly released. 

According to a draft copy of the bill obtained by Blockworks, the Crypto Asset National Security Enhancement Act seeks to subject DeFi protocols to the same rules as other US-regulated financial intermediaries. 

The bill would require anyone who “controls” a DeFi protocol to ensure there are anti-money laundering programs in effect and adhere to know-your-customer (KYC) policies. DeFi protocol controllers would also be responsible for reporting suspicious activity and make sure anyone blocked by sanctions is not using the protocol. 

If there is not an identifiable controller of the protocol, the bill states that anyone who invests more than $25 million in developing the protocol would be held responsible. 

“Virtual currency kiosks” such as bitcoin ATMs would be required under federal law to abide by KYC laws, the bill proposes. 

Operators of such ATMs/machines must “verify and record, at a minimum, the name and physical address of the consumer, which shall include review of an official document evidencing nationality or residence that includes a photograph of the consumer,” the bill states. 

This bill comes after past bipartisan efforts to advance crypto rules at the federal level have fallen short. Sens. Elizabeth Warren, D-Mass., and Roger Marshall, R-Kans., introduced the Digital Asset Anti-Money Laundering Act last session. The senators brought the bill to the floor in December, just weeks before the session ended, and the legislation never made it to markup or vote. 

Warren and Marshall’s bill focused on limiting financial institutions’ access to crypto mixing services, privacy coins and “other anonymity-enhancing technologies.” The US Department of Treasury sanctioned crypto mixing service Tornado Cash months before Warren and Marshall introduced their bill.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.png

Research

Pipe Network is a decentralized content delivery network (dCDN) that replaces the sparse, capital intensive data center footprint of traditional CDNs with a permissionless mesh of independent node operators. By orchestrating under-utilized resources that already exist at the edge, rather than purchasing or leasing thousands of servers, Pipe slashes capital intensity while letting supply expand autonomously in the places where bandwidth is scarcest and most expensive.

article-image

Big names are projecting the S&P 500 will post a double-digit decline

article-image

A 29-minute halt in block production briefly froze Base, but DeFi dodged the bullet

article-image

Companies can find new audiences by moving beyond traditional press releases, says Aubrey Strobel

article-image

All models are wrong, but some are useful

article-image

The major crypto wallet deepens its trading capabilities

article-image

US equities were in the green Monday after July’s labor report miss sent markets lower